Maple Leaf Foods Third Quarter 2019 All do llar amo unts are pre - PowerPoint PPT Presentation

Maple Leaf Foods Third Quarter 2019 All do llar amo unts are pre se nte d in Canadian do llars unle ss o the rwise no te d. MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

F orward-looking Statements and non-IFRS Measures T his pre se nta tio n c o nta ins “fo rwa rd-lo o king info rma tio n” within the me a ning o f a pplic a b le se c uritie s la w. T he se sta te me nts a re b a se d o n c urre nt e xpe c ta tio ns, e stima te s, fo re c a sts, a nd pro je c tio ns a b o ut the industrie s in whic h the Co mpa ny o pe ra te s, a s we ll a s b e lie fs a nd a ssumptio ns ma de b y the Ma na g e me nt o f the Co mpa ny. T he Co mpa ny’ s e xpe c ta tio ns with re spe c t to future sa le s a nd re turns a sso c ia te d with the a ntic ipa te d g ro wth o f its pla nt-b a se d pro te in b usine ss a s o f the da te he re o f a re b a se d o n a numb e r o f a ssumptio ns, e stima te s a nd pro je c tio ns tha t ha ve b e e n de ve lo pe d b a se d o n e xpe rie nc e a nd a ntic ipa te d tre nds, inc luding b ut no t limite d to : ma rke t g ro wth a ssumptio ns, ma rke t sha re a ssumptio ns, ne w pro duc t inno va tio n, fo re ig n e xc ha ng e ra te s a nd c o mpe titio n. T he Co mpa ny’ s e xpe c ta tio ns with re spe c t to impro ving po rk ma rke t e c o no mic s a s o f the da te he re o f a re b a se d o n a numb e r o f a ssumptio ns, inc luding b ut no t limite d to : po rk supply pre ssure s in Afric a n Swine F e ve r c o nfirme d re g io ns, g lo b a l e xpo rt tra de tre nds a nd ho g future s pric ing . T he se sta te me nts a re no t g ua ra nte e s o f future pe rfo rma nc e a nd invo lve a ssumptio ns a nd risks a nd unc e rta intie s tha t a re diffic ult to pre dic t. T he se a ssumptio ns ha ve b e e n de rive d fro m info rma tio n c urre ntly a va ila b le to the Co mpa ny, inc luding info rma tio n o b ta ine d b y the Co mpa ny fro m third-pa rty so urc e s. T he se a ssumptio ns ma y pro ve to b e inc o rre c t in who le o r in pa rt. I n a dditio n, a c tua l re sults ma y diffe r ma te ria lly fro m tho se e xpre sse d, implie d, o r fo re c a ste d in suc h fo rwa rd-lo o king info rma tio n, whic h re fle c t the Co mpa ny’ s e xpe c ta tio ns o nly a s o f the da te he re o f. Ple a se re fe r to the se c tio ns e ntitle d “Risk F a c to rs” a nd “F o rwa rd-L o o king Sta te me nts” in the Co mpa ny's Ma na g e me nt Disc ussio n a nd Ana lysis fo r the fisc a l ye a r e nde d De c e mb e r 31, 2018 a nd fo r the q ua rte r e nde d Se pte mb e r 30, 2019 fo r a dditio na l de ta il. I n a dditio n, this pre se nta tio n c o nta ins the fo llo wing no n-I F RS me a sure s: a rning s: De fine d a s e a rning s b e fo re inc o me ta xe s a djuste d fo r ite ms tha t a re no t c o nside re d re pre se nta tive o f o ng o ing o pe ra tio na l a c tivitie s o f the b usine ss, a nd Adjuste d Ope ra ting E ite ms whe re the e c o no mic impa c t o f the tra nsa c tio ns will b e re fle c te d in e a rning s in future pe rio ds whe n the unde rlying a sse t is so ld o r tra nsfe rre d. a rning s pe r Sha re : De fine d a s b a sic e a rning s pe r sha re a djuste d fo r a ll ite ms tha t a re no t c o nside re d re pre se nta tive o f o ng o ing o pe ra tio na l a c tivitie s o f the b usine ss, a nd ite ms Adjuste d E whe re the e c o no mic impa c t o f the tra nsa c tio ns will b e re fle c te d in e a rning s in future pe rio ds whe n the unde rlying a sse t is so ld o r tra nsfe rre d. a xe s, De pre c ia tion a nd Amortiza tion: De fine d a s Adjuste d Ope ra ting E a rning s plus de pre c ia tio n a nd inta ng ib le a sse t a mo rtiza tio n, a djuste d fo r ite ms Adjuste d E a rning s Be fore Inte re st, T inc lude d in o the r e xpe nse tha t a re no t c o nside re d re pre se nta tive o f o ng o ing o pe ra tio na l a c tivitie s o f the b usine ss. Ne t (De bt) Ca sh: De fine d a s c a sh a nd c a sh e q uiva le nts, le ss lo ng -te rm de b t a nd b a nk inde b te dne ss. Construc tion Ca pita l: De fine d a s inve stme nts in pro je c ts o ve r $50.0 millio n tha t a re re la te d to lo ng e r-te rm stra te g ic initia tive s, with no re turns e xpe c te d fo r a t le a st 12 mo nths in the future a nd the a sse t will b e re -c a te g o rize d fro m Co nstruc tio n Ca pita l o nc e o pe ra tio na l. Core Gross Ma rg in: De fine d a s g ro ss ma rg in a djuste d fo r the impa c t o f ine ffic ie nc ie s a sso c ia te d with sta rt-up pro duc tio n a nd o the r c o sts re la te d to b uilding sc a le to suppo rt hig h g ro wth Ple ase re fe r to the Co mpany’ s Manag e me nt and Disc ussio n and Analysis fo r the q uarte r e nde d Se pte mb e r 30, 2019 fo r additio nal info rmatio n o n no n-I F RS financ ial me asure s 2 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

Our objectives today 1. Describe our new segmented reporting and key financial metrics 2. Explain erratic global pork markets 3. Update you on our progress to deliver on our strategic Blueprint 4. Unpack our significant investment in Plant Protein to drive growth and value creation 3 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

A pivot point in Plant Protein; extraordinary events in global pork markets  New reporting reflects two significant segments with different financial goals:  Meat Protein with a robust multi-year agenda of profitable growth  Plant Protein capitalizing on enormous opportunities for rapid top-line growth  Pork markets experienced unexpected erratic conditions connected to global trade uncertainty and African Swine Fever  Brand renovation builds momentum; double digit growth in U.S. sustainable meat sales  Advanced our strategic Blueprint to deliver financial targets and leadership in sustainability  Investments in Plant Protein business fueled >30% sales growth rates and accelerating 4 4 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

Q3 Results reflect significant progress in advancing our new segmented operating direction Meat Protein Maple Leaf Consolidated Financial Results Deliver profitable growth and EBITDA margin target of 14%-16% in 2022 Q3 2019 Q3 2019 Sales ($M) $953.3 +13.7% $995.83 Sales ($M) $85.4 +8.0% Adjusted EBITDA Adjusted EBITDA (%) 9.0% - 40 bps $0.03 Adjusted EPS ($) Plant Protein Reach $3B in sales within 10 years and maintain core gross margin of ~30% $403.1 Net Debt ($M) Q3 2019 Sales ($M) $47.0 +30.1% Core Gross Margin (%) 28.9% +380 bps Construction $79.5 Capital ($M) SG&A ($M) $44.9 +422% 5 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

Global pork markets were thrown off balance by extraordinary events… China North America The Paradox Hog slaughter The Paradox accelerated BUT ASF Hog NA hog prices North American hog dramatically production Pork prices fall fall as China increases reduces hog and pork prices fall first, then rise puts tariffs on with population in US pork and despite dramatic rise expected China by Frozen pork temporarily ~50% 1 and is in demand for pork in increase in released from suspends spreading demand from storage China Canadian China through Asia imports Imports fall first, then rise 1. Rabobank, Sept 2019 6 6 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

W e were on the wrong side of these events for Q3, with offsetting benefits anticipated in Q4 Erratic August Hog Futures Impact to Maple Leaf Locked-in costs and Locked-in summer Trade barriers negatively communicated price increases prepared meats raw impacted North American material costs in April at hog prices and processor height of pork markets spreads Raised prices to offset Pork complex traded higher costs 220 bps below five year But only realized benefit in average late Q3 Aug 2019 Hog Futures (LHS) Some transitory prepared Recent movement in US Primary processing spread (RHS) meats volume softness in exports and futures signal Primary processing spread 5 –year average (RHS) the wake of erratic markets improving markets Source: CME, USDA 7 7 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

W e continue to be focused on executing our strategic Blueprint 8 8 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019

…accomplishing several milestones in the third quarter Sustainability Strategy Poultry Strategy Food Renovation Adopted Science Based • Construction of new scale Brands continued to shift • • Targets to more aggressively poultry facility underway sales mix toward higher reduce emissions - 1 of only margin prepared meats Core contributor to 2 meat companies globally • structural margin expansion Improved operational • Sustainable meats continued • efficiencies post renovation to deliver double-digit Completed national roll-out growth in the U.S • of Prime Raised Without Commissioned humane CO 2 Antibiotics • stunning in Edmonton poultry facility 9 9 MAPLE LEAF FOODS – Q3 2019 BUSINESS AND FINANCIAL REVIEW | OCTOBER 30. 2019